Municipal investment backlog in schools grows to EUR 47.7 billion

• Increasing numbers of students and expansion of all-day childcare increase investment needs
• Municipal investment in education is rising but not keeping up with growing demand
• Policymakers need to make structural changes to address investment weakness

According to the KfW Municipal Panel 2018, the backlog of investment in Germany’s municipalities has reached a new high of nearly EUR 159 billion. A special analysis recently conducted by KfW Research at the start of the new school year revealed that schools now account for the highest share, with around EUR 47.7 billion. It shows that the investment backlog for schools has grown by EUR 14.9 billion on the previous year, affecting larger cities and municipalities in particular. At regional level, North Rhine Westphalia and southern Germany record the highest rise. Municipalities are also increasingly unable to invest in child daycare centres. The backlog of investment in daycare for very young children is currently at EUR 7.6 billion (plus EUR 2.9 billion). The overall backlog of municipal investment in education has thus risen to EUR 55 billion (previous year: EUR 37.4 billion).

The rise is due to growing demand and municipalities’ limited investment capacities. “The number of children under the age of six has grown by 450,000 in the past 8 years. This is driving the need to expand child daycare centres and schools, especially in growing conurbations”, said Dr Jörg Zeuner, Chief Economist of KfW Group. In addition to growing numbers of children and students, quality ambitions such as the broad expansion of all-day childcare are increasing the demand for municipal investment in the education sector.

Although municipal investment expenditure on schools and child daycare centres has been increasing gradually for the past few years, this does not necessarily provide more and better educational infrastructure. “A large portion of the expenditure is literally being ‘eaten up’ by rising construction prices. In addition, capacity bottlenecks in municipal administration and, in particular, the construction industry, are hampering the planning and implementation of further investment”, said Zeuner. “This is the result of a budgetary prioritisation in the past decades that was not focused on the maintenance and expansion of infrastructure. A rethink is necessary here.”

At the current level of investment, the reduction of the backlog for schools and child daycare centres would take nearly seven years. This does not even take into account additional needs such as the expansion of all-day schools and the maintenance of existing infrastructure. “We need structural improvements to municipalities’ investment capacities so that we can ensure the necessary investment in schools and child daycare centres in the long term”, Zeuner added. “Good schools and child daycare centres are the foundation of Germany’s competitiveness and children’s personal development. Poor education today means higher social expenditure tomorrow – a bad deal. Good education requires not just a choice of modern schools, dedicated teachers and intelligent learning content, but also decent buildings. It is high time to make real progress here after years of standstill.”

Note:
KfW Research publishes further publications and studies that are based on the data of the KfW Municipal Panel, such as the current Economics in Brief No. 162 “Where to put all the children? Investment backlog in schools and child daycare centres continues to grow”, which is available at www.kfw.de/research-kommunen.

The KfW Municipal Panel is a survey conducted by the German Institute for Urban Affairs (Difu) on behalf of KfW Group since 2009. It is the largest periodic survey of treasuries in cities with district status, regional districts and district towns with more than 2,000 inhabitants in Germany. The core areas covered by the survey are municipal finances, municipal investment and its funding. The report and further information can be accessed at www.kfw.de/kommunalpanel.